Utopia of Investment

During a call with a startup client, we heard the term investor Nth time. “What is a need for investor or investment? It is a self-sufficient business plan.” These days no promoters of startup interested in sales and services but on investment pouring in. They even do not have a plan of servicing of investment which may pour in.

The motive to start a company earlier was to do business and earn a good profit. New age promoters initiate a business venture not to attract customers and clients but investors.

Most of these promoters have a unique business idea, software, technology, patent, Industrial design and other know-how. They want to sale their know-how in the form of business. These promoters work hard on their brainchild until it starts walking on its own feet. Once it attracts investment or a strategic buyer, promoters move on. After selling the present venture, promoters may enjoy life and look for a new business idea.

Earlier, promoters need projections to understand and show the actual requirement of investment and future return. These days, the focus is the projection to have expected valuation. There is no harm in futuristic valuation or investment.

The significant investment these days comes for internal expenses – salaries of promoters and customer “acquisition”. The danger lies deep into clauses of investment contracts. 

Promoters do not have the answer how will they service investment came in. Most new-age promoters put their bet on appreciation in valuation and financial market forces for return on investment for investors.

Young promoters fails to notice the underlying factor; the market valuation is a mathematical function of values of sales and services generated or expected to be generated by the company.

Once, a company have placed marketable know-how, the focus should be on the market growth and induction or development of new know-how within the company.

Promoters should carefully protect their long terms long term management control or place professional management of their own choice.

All investment invitation should be focused to fund long term capital and working capital investment. Every single unit of money coming as the capital investment is costly capital and return of investment of all early-stage investors is high and aggressive. No investor invest in a company to provide capital gain to earlier promoters but to make capital gain out of present know-how, business plan and worth of the company. Investors purchase some promoters shares to provide motivation and comfort to existing promoters.

All promoters should focus on acquiring a talent manufacturing and marketing team to sale products of the company. They should invest in research and development. Their investment invitation should be focused, planned, calculated with an idea to grow the company to new heights.
I do not want to see as talented promoters as executives in the company they once promoted.